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July 14, 2009



I don't see an alternative offered here, nor do I see any indication of how the current plan actually offered would "outsource" anything about energy.

Basically, it seems to be a complaint that it's going to be expensive, but that's the inevitable appearance when off-the-books costs get brought onto the books. The costs are merely no longer invisible.

One claim that does seem substantive - that the poorest will pay the most - is merely mistaken, so far as I can tell. The income from the bill pays for a tax rebate and credit, so it's actually a net positive for those at the bottom.


I should probably clarify: if you don't believe in the negative externalities of carbon emissions, then certainly it's all a big pointless cost to you. But there's no discussion of that here, or even an allusion to any controversy.

Nathan Smith

Yes, that's true, Palin doesn't deal with the externalities issue.

My concern is that cap-and-trade will serve as a restraint of trade similar to FDR's NRA, shutting new entrants out of industries. That wouldn't happen, at least in theory, if carbon credits were simply allocated and made tradable. But the manner in which the bill is passed, which seems to involve giving the credits away to favored industries, is ominous, suggesting a tacit quid pro quo.

Suppose you're a factory owner in the Midwest, who uses a lot of energy and provides a few hundred or a few thousand jobs. A carbon tax would destroy your competitiveness and drive you out of business. So, when environmental regulations are being passed, you get the local congressmen to give you special access to carbon credits. In theory, the carbon credits are tradable. But now, suppose you say, "Hey, these carbon credits are worth more than the profits from the factory! I'll be better off if I close the factory and sell the credits." Of course, that's actually the whole idea of cap-and-trade: by forcing factory owners and others to internalize the costs of their polluting, it would move pollution rights to where the marginal benefits from polluting activities are highest. But to a local congressman and his constituents, it would look like disgusting greed and breach of trust. If the factory owner would therefore refuse to sell out his carbon and shut down production for fear of political reprisals, well, cap-and-trade becomes a de facto restriction on entry, with devastating consequences for the power of competition to enhancing industrial productivity.

It would be far better to raise gas taxes and impose congestion charges in cities.

Palin does not have Obama's habit of using rhetorical fog to mask her own confusions and ambivalences. (In Obama's case, the problem is the bankruptcy of his belief that relying on experts is some kind of a panacea. The truth is that all on live policy issues, the experts almost always either (a) disagree, or (b) agree, but advocate something that is politically infeasible. Where experts agree and their views are not unpopular, their advice will already have been taken.) You might say that she's more direct, more forthright, or something; I'd be inclined to say simply that the article linked is just smarter than Obama's typical utterances. That's not to say she deals with everything: negative externalities and competitive effects are not dealt with. But you can't expect too much of politicians.


That the bill is deeply flawed is inarguable. The question is whether it is better than nothing. I suspect that it is, but I'm definitely crossing my fingers.


Hardly anyone likes the proposed bill. Let's give Palin a medal for jumping on the bandwagon.

Nathan Smith

You can recognize the externalities and still advocate doing nothing if the costs of action, at nearly every margin, are greater than the costs of inaction. That's more or less my position: we can't stop global warming, if the science is right, and we can only slow it down at exorbitant cost. Better just to adapt. Particularly since global warming seems to have stopped in recent years and may turn out to have been a false alarm.

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